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HomeMy WebLinkAbout25D - AGMT - PREP SEWER AND WATER PLANREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: OCTOBER 17, 2011 TITLE: AGREEMENT FOR PREPARATION OF A SANITARY SEWER AND WATER FINANCIAL PLAN WITH BLACK & VEATCH CORPORATION CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Ordinance on 151 Reading ? Ordinance on 2"d Reading ? Implementing Resolution ? Set Public Hearing For_ CONTINUED TO FILE NUMBER Direct the City Attorney to prepare and authorize the City Manager and the Clerk of the Council to execute an agreement with Black & Veatch Corporation in an amount not to exceed $230,000 for the preparation of the City's 2012 Sanitary Sewer and Water Financial Plan. DISCUSSION On June 6, 2011, the City Council approved an increase in water and sewer rates and directed staff to have an assessment prepared that addresses the City's long-term water and sanitary sewer infrastructure needs. The Water Resources staff prepared a Request for Proposals (RFP) for an assessment of the water and sewer systems and sent it to qualified firms on August 21, 2011. RFPs were sent to the following firms: Black and Veatch Brown and Caldwell CH2M Hill HDR Inc. M.F. Whipple and Associates MWH Americas, Inc. Two responses were received and evaluated by a four-member selection committee. Both firms scored above the minimum acceptable score of 70. Sealed fee envelopes were then opened and the fee proposals were analyzed. Listed below are the ratings and proposed fees of the two firms. Firm Score Fee Black and Veatch 95 $191,340 M.F. Whipple and Associates 72.5 $56,190 25D-1 Agreement for Preparation of a Sanitary Sewer and Water Financial Plan October 3, 2011 Page 2 Staff recommends that Black & Veatch Corporation be retained for this project. Their proposal encompassed a clear understanding of the City's goals and objectives as required by the RFP. The primary result is expected to include a Rehabilitation and Replacement (R&R) Program and a reasonable rate schedule. In addition, their proposal will provide the City with two separate tools for future use. The first tool is a database intended to categorize all the City's water and sewer assets. Black & Veatch Corporation's database tool allows the City to update the condition of assets on an on-going basis and Black & Veatch proposes to assist with potential interfaces with the City's asset management systems. The R&R Program schedule of recommendations generated by the database feeds into the second tool proposed, which is a financial model for each utility. This financial modeling tool will allow consideration of different capital improvement needs, develop an prioritize R&R schedules, and provide for "what-if' analyses for various reserve funding and rate increase scenarios. Black & Veatch Corporation designed both tools for use on an on-going basis. ENVIRONMENTAL IMPACT There is no environmental impact associated with this action. FISCAL IMPACT Funds are available in the Water Administrative and Engineering Fund (account no. 06017645 62300). APPROVED AS TO FUNDS AND ACCOUNTS: Raul Godinez II Executive Direc or Public Works Agency Francisco Gutierrez Executive Director Finance & Management Services Agency RG:RB Exhibit: 1. Consultant Agreement 25D-2 AGREEMENT FOR PROVISION OF FINANCIAL AND ENGINEERING EVALUATION SERVICES THIS AGREEMENT, made and entered into this 19`h day of September, 2011 by and between Black and Veatch Corporation (hereinafter "Consultant"), and the City of Santa Ana, a charter city and municipal corporation organized and existing under the Constitution and laws of the State of California (hereinafter "City"). RECITALS A. The City desires to retain a consultant having special skill and knowledge in the field of engineering and financial analysis to evaluate the City's sanitary sewer and water program. B. Consultant represents that Consultant is able and willing to provide such services to the City. C. In undertaking the performance of this Agreement, Consultant represents that it is knowledgeable in its field and that any services performed by Consultant under this Agreement will be performed in compliance with such standards as may reasonably be expected from a professional consulting firm in the field. NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the terms and conditions hereinafter set forth, the parties agree as follows: 1. SCOPE OF SERVICES Consultant shall perform financial and engineering evaluation services to prepare a sanitary sewer and water utility financial plan for the City, as set forth in Exhibit A, attached hereto and incorporated by this reference. 2. DELIVERY OF WORK PRODUCT - OWNERSHIP Consultant warrants and represents that it has the absolute right to enter into and perform this Agreement and will perform its obligations hereunder in accordance with standards and practices prevailing in the industry. Consultant's contribution to the Project, including works to be produced by Consultant hereunder, will not infringe or misappropriate the proprietary or personal rights of any third person or party. Consultant shall deliver to City any work product which results from the services provided. Said work product shall be submitted in hard copy and produced in a form compatible with City's information systems, as agreed between the Project Manager and Consultant. In regard to all material produced as a deliverable under this Agreement, including but not limited to records, papers, drawings, specifications, programs, systems and other materials prepared by Consultant, Consultant agrees, for itself and its affected officers, employees, agents, contractors, and volunteer workers, that such material shall be the property of the City, and (b) the authors of all such material, award to the City, and to its officers, agents and employees acting within the scope of their official duties, as a condition of payment to the Consultant, a royalty-free, nonexclusive, irrevocable license throughout the world for governmental purposes to disclose, publish, translate, reproduce, and use such materials. 1 25D-3 3. COMPENSATION a. City agrees to pay, and Consultant agrees to accept as total payment for its services, the rates and charges identified in Exhibit B. The total sum to be expended under this Agreement shall not exceed $230,000.00 during the term of this Agreement. b. Payment by City shall be made within thirty (30) days following receipt of proper invoice evidencing work performed, subject to City accounting procedures. Payment need not be made for work which fails to meet the standards of performance set forth in the Recitals which may reasonably be expected by City. 4. TERM This Agreement shall commence on the date first written above and terminate on June 30, 2012, unless terminated earlier in accordance with Section 13, below. The term of this Agreement may be extended by a writing executed by the Executive Director of Public Works and the City Attorney for City, and by the Project Manager for Consultant. 5. INDEPENDENT CONTRACTOR Consultant shall, during the entire term of this Agreement, be construed to be an independent contractor and not an employee of the City. This Agreement is not intended nor shall it be construed to create an employer-employee relationship, a joint venture relationship, or to allow the City to exercise discretion or control over the professional manner in which Consultant performs the services which are the subject matter of this Agreement; however, the services to be provided by Consultant shall be provided in a manner consistent with all applicable standards and regulations governing such services. Consultant shall pay all salaries and wages, employer's social security taxes, unemployment insurance and similar taxes relating to employees and shall be responsible for all applicable withholding taxes. 6. INSURANCE Prior to undertaking performance of work under this Agreement, Consultant shall maintain and shall require its subcontractors, if any, to obtain and maintain insurance as described below: a. Commercial General Liability Insurance. Consultant shall maintain commercial general liability insurance which shall include, but not be limited to protection against claims arising from bodily and personal injury, including death resulting therefrom and damage to property, resulting from any act or occurrence arising out of Consultant's operations in the performance of this Agreement, including, without limitation, acts involving vehicles. The amounts of insurance shall be not less than the following: single limit coverage applying to bodily and personal injury, including death resulting therefrom, and property damage, in the total amount of $1,000,000 per occurrence. Such insurance shall (a) name the City, its officers, employees, agents, volunteers and representatives as additional insured(s); (b) be primary and not contributory with respect to insurance or self-insurance programs maintained by the City; and (c) contain standard separation of insureds provisions. b. Business automobile liability insurance, or equivalent form, with a combined single limit of not less than $1,000,000 combined single limit. Such insurance shall include coverage for owned, hired and non-owned automobiles. c. Worker's Compensation Insurance. In accordance with the provisions of Section 3300 of the Labor Code, Consultant, if Consultant has any employees, is required to be insured against liability for 256-4 worker's compensation or to undertake self-insurance. Prior to commencing the performance of the work under this Agreement, Consultant agrees to obtain and maintain any employer's liability insurance with limits not less than $1,000,000 per accident. d. Professional liability (errors and omissions) insurance, with a combined single limit of not less than $1,000,000 per claim. The following requirements apply to the insurance to be provided by Consultant pursuant to this section: (i) Consultant shall maintain all insurance required above in full force and effect for the entire period covered by this Agreement. (ii) Certificates of insurance shall be furnished to the City upon execution of this Agreement and shall be approved in form by the City Attorney. (iii) Certificates and policies shall state that the policies shall not be canceled or reduced in coverage or changed in any other material aspect without thirty (30) days prior written notice to the City. f. If Consultant fails or refuses to produce or maintain the insurance required by this section or fails or refuses to furnish the City with required proof that insurance has been procured and is in force and paid for, the City shall have the right, at the City's election, to forthwith terminate this Agreement. Such termination shall not effect Consultant's right to be paid for its time and materials expended prior to notification of termination. Consultant waives the right to receive compensation and agrees to indemnify the City for any work performed prior to approval of insurance by the City. 7. INDEMNIFICATION Consultant agrees to and shall indemnify and hold harmless the City, its officers, agents, employees, consultants, special counsel, and representatives from liability: (1) for personal injury, damages, just compensation, restitution, judicial or equitable relief arising out of claims for personal injury, including death, and claims for property damage, which may arise from the negligence, recklessness or willful misconduct of the Consultant or its contractors, subcontractors, agents, employees, or other persons acting on their behalf which relates to the services described in section 1 of this Agreement; and (2) from any claim that personal injury, damages, just compensation, restitution, judicial or equitable relief is due by reason of the negligence, recklessness or willful misconduct of Consultant arising from this Agreement. The Consultant further agrees to indemnify, hold harmless, and pay all costs for the defense of the City, including fees and costs for special counsel to be selected by the City, regarding any action by a third party asserting that personal injury, damages, just compensation, restitution, judicial or equitable relief due to personal or property rights arises by reason of the terms of, or effects arising from this Agreement. City may make all reasonable decisions with respect to its representation in any legal proceeding. 8. CONFIDENTIALITY If Consultant receives from the City information which due to the nature of such information is reasonably understood to be confidential and/or proprietary, Consultant agrees that it shall not use or disclose such information except in the performance of this Agreement, and further agrees to exercise the same degree of care it uses to protect its own information of like importance, but in no event less than reasonable care. "Confidential Information" shall include all nonpublic information. Confidential information includes not only written information, but also information transferred orally, visually, electronically, or by other means. Confidential information disclosed to either party by any subsidiary 256-5 and/or agent of the other party is covered by this Agreement. The foregoing obligations of non-use and nondisclosure shall not apply to any information that (a) has been disclosed in publicly available sources; (b) is, through no fault of the Consultant disclosed in a publicly available source; (c) is in rightful possession of the Consultant without an obligation of confidentiality; (d) is required to be disclosed by operation of law; or (e) is independently developed by the Consultant without reference to information disclosed by the City. 9. CONFLICT OF INTEREST CLAUSE Consultant covenants that it presently has no interests and shall not have interests, direct or indirect, which would conflict in any manner with performance of services specified under this Agreement. 10. NOTICE Any notice, tender, demand, delivery, or other communication pursuant to this Agreement shall be in writing and shall be deemed to be properly given if delivered in person or mailed by first class or certified mail, postage prepaid, or sent by facsimile or other telegraphic communication in the manner provided in this Section, to the following persons: To City: Clerk of the City Council City of Santa Ana 20 Civic Center Plaza (M-30) P.O. Box 1988 Santa Ana, CA 92702-1988 Fax No. 714- 647-6956 With courtesy copies to: and Executive Director of the Public Works Agency City of Santa Ana 20 Civic Center Plaza (M-21) P.O. Box 1988 Santa Ana, California 92702 Fax No. 714- 647-5622 City Attorney City of Santa Ana 20 Civic Center Plaza (M-29) P.O. Box 1988 Santa Ana, California 92702 Fax No. 714- 647-6515 To Consultant: Black and Veatch Corporation Marty Travers 800 Wilshire Boulevard, Suite 600 Los Angeles, California 90017 Fax No. 213-312-3399 A party may change its address by giving notice in writing to the other party. Thereafter, any communication shall be addressed and transmitted to the new address. If sent by mail, communication shall be effective or deemed to have been given three (3) days after it has been deposited in the United 25D-6 States mail, duly registered or certified, with postage prepaid, and addressed as set forth above. If sent by facsimile, communication shall be effective or deemed to have been given twenty-four (24) hours after the time set forth on the transmission report issued by the transmitting facsimile machine, addressed as set forth above. For purposes of calculating these time frames, weekends, federal, state, County or City holidays shall be excluded. 11. EXCLUSIVITY AND AMENDMENT This Agreement represents the complete and exclusive statement between the City and Consultant, and supersedes any and all other agreements, oral or written, between the parties. In the event of a conflict between the terms of this Agreement and any attachments hereto, the terms of this Agreement shall prevail. This Agreement may not be modified except by written instrument signed by the City and by an authorized representative of Consultant. The parties agree that any terms or conditions of any purchase order or other instrument that are inconsistent with, or in addition to, the terms and conditions hereof, shall not bind or obligate Consultant nor the City. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein. 12. ASSIGNMENT Inasmuch as this Agreement is intended to secure the specialized services of Consultant, Consultant may not assign, transfer, delegate, or subcontract any interest herein without the prior written consent of the City and any such assignment, transfer, delegation or subcontract without the City's prior written consent shall be considered null and void. Nothing in this Agreement shall be construed to limit the City's ability to have any of the services which are the subject to this Agreement performed by City personnel or by other consultants retained by City. 13. TERMINATION This Agreement may be terminated by the City upon thirty (30) days written notice of termination. In such event, Consultant shall be entitled to receive and the City shall pay Consultant compensation for all services performed by Consultant prior to receipt of such notice of termination, subject to the following conditions: a. As a condition of such payment, the Executive Director may require Consultant to deliver to the City all work product completed as of such date, and in such case such work product shall be the property of the City unless prohibited by law, and Consultant consents to the City's use thereof for such purposes as the City deems appropriate. However, any use of unfinished work product shall be at City's sole risk. b. Payment need not be made for work which fails to meet the standard of performance specified in the Recitals of this Agreement. 14. DISCRIMINATION Consultant shall not discriminate because of race, color, creed, religion, sex, marital status, sexual orientation, age, national origin, ancestry, or disability, as defined and prohibited by applicable law, in the recruitment, selection, training, utilization, promotion, termination or other employment related activities. Consultant affirms that it is an equal opportunity employer and shall comply with all applicable federal, state and local laws and regulations. 25d-7 15. JURISDICTION - VENUE This Agreement has been executed and delivered in the State of California and the validity, interpretation, performance, and enforcement of any of the clauses of this Agreement shall be determined and governed by the laws of the State of California. Both parties further agree that Orange County, California, shall be the venue for any action or proceeding that may be brought or arise out of, in connection with or by reason of this Agreement. 16. PROFESSIONAL LICENSES Consultant shall, throughout the term of this Agreement, maintain all necessary licenses, permits, approvals, waivers, and exemptions necessary for the provision of the services hereunder and required by the laws and regulations of the United States, the State of California, the City of Santa Ana and all other governmental agencies. Consultant shall notify the City immediately and in writing of its inability to obtain or maintain such permits, licenses, approvals, waivers, and exemptions. Said inability shall be cause for termination of this Agreement. 17. MISCELLANEOUS PROVISIONS a. Each undersigned represents and warrants that its signature hereinbelow has the power, authority and right to bind their respective parties to each of the terms of this Agreement, and shall indemnify City fully, including reasonable costs and attorney's fees, for any injuries or damages to City in the event that such authority or power is not, in fact, held by the signatory or is withdrawn. b. Captions and headings in this Agreement, including the title of this Agreement, are for convenience only and are not to be considered in construing this Agreement. c. All Exhibits referenced herein and attached hereto shall be incorporated as if fully set forth in the body of this Agreement. /// /// /// Zs6-s IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and year first above written. CITY OF SANTA ANA ATTEST: MARIA D. HUIZAR Clerk of the Council APPROVED AS TO FORM: JOSEPH STRAKA Interim City Attorney By: Laura Sheedy Assistant City Attorney RECOMMENDED FOR APPROVAL: RAUL GODINEZ, II Executive Director Public Works Agency PAUL M. WALTERS Interim City Manager BLACK AND VEATCH CORPORATION MARTY TRAVERS President 25D-9 25D-10 City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN Scope of Work PROJECT UNDERSTANDING The City of Santa Ana wishes to obtain a qualified consultant to 1) conduct an evaluation of the City's sanitary sewer and water systems and 2) to perform a comprehensive sanitary sewer and water rate study. The study will entail an assessment of the City's infrastructure to develop a Rehabilitation and Replacement (R&R) Program and then design both sanitary sewer and water rates that comply with all legal requirements and protect the long-term financial health of the systems. The major goals identified include: €4 Develop sanitary sewer and water rates that are fair, objective and fiscally appropriate over a 20-year study period. i Assess the City's operations and budgets to determine current and future level of service. tl Evaluate the City's sanitary sewer and water infrastructure and determine necessary improvements. I Develop an R&R Program and long-range budget for both the sanitary sewer and water systems. M Provide alternative funding mechanisms to fund operations and capital improvements while minimizing rate impacts. V1 It is also understood that the City may deem it necessary to perform the following additional duties: R Project growth and water demands for the sanitary sewer and water systems. El Conduct a rate analysis on the basis of available water supply. rIR Build a complete and comprehensive CIP program for both the sanitary sewer and water systems. i4 Develop a Water Master Plan using existing City GIS data. Similar to other sewer and water systems in California, the City is facing several challenges presented by reduced water demand, water supply shortages, cutbacks in personnel, the recent adoption of SBx7-7, and increased environmental regulations. In light of these, the City is striving to provide reliable sewer and water services at affordable rates to its residents. The result of this study will assist the City in meetings its goals. City of Santa Ana Operations The City of Santa Ana serves a population of about 320,000 residents in Orange County, California. It obtains its potable water supply from groundwater and import water via Metropolitan Water District. The BLACK & VEATCH I Scope of Work Exhibit A 25D-11 City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN water system consists of 20 wells, 8 reservoirs for a total capacity of 49 million gallons, 7 import water interconnections, 7 booster pumping stations, and 16 emergency interconnections with neighboring utilities. The sanitary sewer system is a collection only system with 2 lift stations, 45,000 laterals, 8;000 manholes and 390 miles of pipelines. PROJECT APPROACH Black & Veatch has developed a project approach that relies on the fundamental principle of first understanding the needs and priorities, recognizing the evolving nature of the sewer and water systems, and then developing a holistic, yet flexible solution aligned with meeting the City's defined goals and stated objectives. Rehabilitation and Replacement Program To meet the City's objective of developing an R&R Program, Black & Veatch will utilize our Comprehensive Asset Management & Prioritization System (CAMPS) model. CAMPS utilizes a holistic approach to managing assets for Capital Asset Management Programs. Due to the City's immediate needs of defining a R&R Program that can be incorporated into the rate study portion, Black & Veatch's approach is to employ the CAMPS model. The CAMPS model is based on projecting the capital rehabilitation and replacement of each asset or grouping of similar assets (e.g. long pipe runs) that will be needed each year to service the City's customers. By aggregating Capital R&R needs by year, financial needs are also identified and can be integrated into the financial plan. As illustrated in the flowchart to the right, the key activities consist of the following: U Confirm all capital assets have been incorporated into the inventory to properly project the R&R needs into the future. E-s Populate the CAMPS Model with available asset inventory data to project R&R schedules and costs for each capital asset by year, considering the following critical elements: Reporting on annual needs for each system. o Allowance for criticality rankings to be incorporated into the model for prioritizing expenditures and considering multiple scenarios based on risk tolerance. BLACK & VEATCH I Scope of Work 25D-12 City of Santa Ana, CA ( SANITARY SEWER AND WATER FINANCIAL PLAN - - -- ----------- Develop specific recommendations for the rate study based on the R&R modeling results and appropriate funding policy changes. Sanitary Sewer and Water Rate Study To meet the City's objective of performing a cost of service and rate study, Black & Veatch will utilize the project approach depicted in Figure 1. The key components consist of the following: Of Financial Planning. Rates and charges should generate adequate revenues to meet the operating and capital costs and provide for the financial stability of both the sanitary sewer and water systems. The analysis will be conducted and modeled to provide for scenario "what-if' assessment, taking into consideration book when it i different assumptions related to growth, analyses. Fran conservation, revenue, and expenses. 47 Cost of Service. The cost of service analyses will take into consideration the functional helped establi aspects of both system operations and cost guidelines for components such as capacity costs, commodity costs, customer costs and other direct costs. The analysis will evaluate the existing systems and the relative load placed on the systems by the different customer classes to fairly allocate costs based on services received. Rate Design. The rate design recommendations will incorporate the City's objectives of examining the rates that promote water conservation goals. Through our experience with multiple utilities, Black & Veatch will help develop rates and charges that are fair, equitable, and defensible and in accordance with AWWA Manual M1 and WEF MOP 27. BLACK & VEATCH I Scope of work 25D-13 Rate Design City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN Methodology Using the project approach as a guide, Black & Veatch has developed a detailed methodology that outlines the required tasks to meet the City's objectives. Task 1- Project Management The objective of this task will be to establish lines of communication, get an in-depth understanding of the study goals and objectives, assign roles and responsibilities, and address questions and concerns. Specific subtasks are: 1.1 Meet to introduce consultant team to City staff, confirm the overall project purpose, and discuss approach and strategies associated with an R&R Program and rate study. 1.2 Obtain financial, operational and other pertinent information based on initial data request. List of data required for the study includes, but is not limited to: Sanitary sewer and water GIS information (already made available). Additional listing of assets not included in the GIS database. Historical asset replacement documentation, historical documentation of maintenance, and the latest Sewer and Water Master Plans. E Revenue budget data covering rate schedules, basis for billings, revenue data, and usage records for all customer classes for the most recent five years. I Expense budget data covering operation and maintenance (0&M), water purchases, routine capital outlay. fl, Long-term capital improvement project plan with estimated costs and scheduling. &= Debt issuance official statements that provide information about debt service, bond covenants, debt service coverage requirements, etc. REHABILITATION AND REPLACEMENT PROGRAM Task 2 - Asset Inventory Gap Analysis The objective of this task is to conduct an asset inventory assessment and to identify gaps in the dataset. Specific subtasks are: BLACK & VEATCH I Methodology 25D-14 City of Santa Ana, CA i SANITARY SEWER AND WATER FINANCIAL PLAN 2.1 Assess the GIS database provided by the City to confirm that sufficient information is available to model capital rehabilitation and replacement needs. 2.2 Meet with City staff to identify additional assets not in the GIS system that will need to be evaluated. 2.3 Review historical asset documentation including maintenance records, Master Plans, close-circuited television (CCTV) reports, and other documents. 2.4 Conduct field inspections on the assets that are not in the GIS system and have no historical maintenance documentation. Task 3 - Capital Asset Rehabilitation and Replacement Needs Evaluation The objective of this task is to develop the R&R Program based on Comprehensive Asset Management & Prioritization System (CAMPS) that can be used in the rate study tasks. CAMPS is an MS Access tools developed by Black & Veatch to manage all assumptions for projecting R&R schedules and costs and to model the R&R activities and funding parameters. BLACK & VEATCH Building a world of difference'. .rte ?s CAMPS "Comprehensive Asset Management and Prioritization System" t-k ].e Q V%t MwRmbuy Vltn ASraltlasf lbrary New RdsubisMRents aaa vRwAMl+ktr.[oR R.e?s R"phaamet © (E Awry hr fi tocYt MadNSgeaddeNO t®tmt. •.? view-My Mode... Specific subtasks are: 3.1 Develop a draft asset class listing based on the asset inventory provided by the City for both sanitary sewer and water capital assets. 3.2 Populate an Asset Class Library based on the agreed draft set of classes. The library will contain logical units of assets also known as "asset classes." In the context of CAMPS, asset classes are BLACK & VEATCH ( Methodology 25D-15 City of Santa Ana, CA i SANITARY SEWER AND WATER FINANCIAL PLAN defined by those assets having a similar function, cost structure, and useful lives and refurbishment intervals. 3.3 Incorporate into the Asset Class Library the useful lives, rehabilitation program definitions, intervals and costs, and replacement schedules and costs for each asset class based on industry standards. €-a Define Useful lives: For each defined asset class a determination as to expected useful life will be made. The useful life is defined as the number of years of normal use that can be expected prior to replacement becoming necessary. The estimate will be based on our industry experience, manufacturers' estimates, previous literature research, and our work for other agencies, These estimates are contained within our CAMPS Library. 5 Define rehabilitation programs, intervals and costs: Most asset classes require various capital rehabilitations on a cyclic basis in order to sustain or extend the asset's useful lives. Pump stations, for example, can be expected to undergo pump rehabilitation, motor overhaul, replacement of electric components, and mechanical overhaul at intervals shorter than the cycle for the replacement of the assets themselves. Where such programs are applicable, we will define appropriate rehabilitation intervals and costs that might be considered capital expenditures. Asset - Tank #107 Installation Date 1955 Asset Class ReserwirSteei Assot Glass Factors Repiacem@nt Factors UsotUt Li?e:;?; years- 60 PricdnpAttn buto Mc; 1 _ Unit Ante - $ 500,000 Re&crbTs?ent RefurbFslrci)ent 1 Painting Frequency years 1o cost 3 - 25,000 1)e(urbfshmer+t 2 Cleaning Frequency yeais 4 host S 40,000 Define replacement intervals and costs: For each asset class an estimate of the base-year replacement cost will be incorporated. The estimates will be based on the experience of our engineers, construction cost estimates we have recently prepared for other clients, industry standards, and our experience with other agencies. For unique assets, we will adjust historical costs to the base year using Engineering News and Report (ENR) indices. 0 Where possible, replacement costs, like other asset attributes, will be defined in terms of unit costs to facilitate the class-based estimating approach (dollars per foot of various types of pipe, dollars per gallon for storage facilities, dollars per square foot for buildings of various classes, etc.). fl Facilitate an Asset Class Validation Workshop: Each of these components of the asset class will be presented in detail within BLACK & VEATCH I Methodology 25D-16 City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN a workshop setting to incorporate City-specific experience with each asset class. We anticipate one 2-hour workshop for each area of capital infrastructure (sanitary sewer and water). ELI Understanding the time-sensitive nature of this study, Black & Veatch will leverage our extensive asset class library to the extent possible to collaboratively guide the City. 3.4 Define appropriate method for the City of determining asset value to comply with GASB34/35 standards. Black & Veatch proposes evaluating the reproduction cost new less depreciation (RCNLD) for assets within the inventory, as it provides a more accurate account of current "value" of the assets than original acquisition cost, less depreciation. CAMPS will be used to generate current asset values and depreciation. 3.5 Develop R&R schedules from CAMPS projecting the specific capitalized rehabilitation, replacement, and costs needed for the next 20 years. Costs are escalated to the year of the R&R. 3.6 Prioritize the R&R schedule based on "needs first" constraint. Needs first relies on the rehabbing or replacing assets that have the highest immediate possibility of failure based on their condition or life cycle. The updated R&R schedule will serve as the basis for R&R activities in the rate analysis portion of the study. 3.7 Specific considerations in the evaluation will be using NASSCO standards for sewer pipes and the incorporation of the water meter replacement program. SEWER AND WATER RATE STUDY Task 4 - Financial Plan The objective of this task is to develop the financial plan for the sanitary sewer and water systems. Specific subtasks are: 4.1 Review the latest Master Plans and Capital Improvement Program (CiP) documents Black R. Veatch will examine major C1P to: (1) identify whether the list of proposed projects appears to adequately and thoroughly address sanitary sewer and water improvement needs for the planning period, and (2) determine whether the City's methodology for project cost estimating appears reasonable. 4.2 Develop historical bill tabulation for water based on current billing system. The bill 100% 90% Bill Tabulation Distribution N 90% a 70% - b 60% , sox 4% - -' 30% 24% G1 10% 1 10 100 1,000 10,000 100,000 Sloat?ly Water Usage - Cd --tteswatial- - - •Commemiai-- - -la8utrial BLACK & VEATCH I Methodology 25D-17 City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN tabulation is a critical element in examining usage trends, potential structure modifications, and the creating new customer classes, In evaluating bill tabulation data, the basis for establishing new tiers, break points, exceptions and promoting water conservation can be determined. 4.3 Develop an Operating Fund financial plan based on forecasted revenue and expenses for the systems. The financial plan will cover a five (5) year period. The financial plan will incorporate the following elements: F Forecast sanitary sewer and water revenues under existing rates for the planning period recognizing projected accounts, volumes, and usage patterns by customer class. Forecast sanitary sewer and water 0&M expenses, power costs, distribution systems, debt service, transfers, reserves, and other expenditures. 4.4 Develop a Capital Fund long-term financial plan based on the capital needs assessment in subtask 4.1. The financial plan will include considerations for various financing alternatives and include a review for affordability based on current and expected rates. 4.5 Develop a R&R Fund financial plan based on capital needs identified in R&R Program that will incorporate annual depreciation expense. 4.6 Develop a profit and loss statement and cash flow forecast to determine the cash flow needs of the systems. The cash flow will serve as the basis for the cost of service and rate design analysis. 4.7 Review reserve fund levels and policy for operating, capital improvement, R&R, and emergencies. Task 5 - Cost of Service Analyses The objective of this task is to perform a cost of service analysis tailored to the City. The goal is to achieve revenue self-sufficiency between services and customer classes within the rate framework. Specific subtasks are: 5.1 Determine the appropriate functional classifications of costs for allocation purposes. 5.2 Classify functional expenses to cost components such as capacity costs, commodity costs, customer costs and other direct costs. BLACK & VEATCH I Methodology 25D-18 City of Santa Ana, CA 1 SANITARY SEWER AND WATER FINANCIAL PLAN 5.3 Classify plant investment to the functional costs categories such as supply, collection, pump stations, treatment, transmission, distribution, and meters. 5.4 Classify operating, administrative, engineering, 0&M, power, etc. to the functional costs categories identified in subtask 5.3. 5.5 Allocate the classified costs of the sanitary sewer and water systems to the customer classes based on the cost components identified in subtask 5.2. 5.6 Estimate class service characteristics associated with each of the functional cost elements by recognizing the bill distribution analysis performed in subtask 3.2. 53 Develop unit costs of service based on the cost allocations. The unit costs of service are applicable to all system users and each class' proportional responsibility for total system costs. The relative responsibility of each class customer will be specifically determined based on each class' estimated service requirements. 5.6 Prepare a comparison of class revenues under existing rates with allocated class costs of service to determine the level of cost recovery by class, and in total, and to demonstrate any needed adjustments to align class revenues and allocated costs. Task 6-- Rate Design The objective of this task is to evaluate the City's existing rates and identify potential modifications to the rates and rate structures. As part of this task, an analysis of the City's billing system capability will be incorporated. In general the design of rates and rate structures intend to accomplish the following: » Be consistent with all applicable laws, statues, rules and regulations governing fees, rates, and charges such as Proposition 218. Address revenue sufficiency, stability, customer clarity, price signaling, and water conservation goals as set forth in SBx7-7. Specific subtasks are: 6.1 Analyze the existing rate structure and develop alternative rate structures that address, at minimum, the following: R; A rate structure that incorporates water conservation rate programs BLACK & VEATCH I Methodology 25D-19 City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN zi A rate structure that incorporates elderly low-income programs M A rate structure that incorporates emergency rates during periods of drought or natural/manmade disasters 6.2 Analyze the current block sizes and seasonal rate differentials and make recommendations to satisfy the California Urban Water Conservation Council Best Management Practices. 6.3 Prepare comparison of revenues expected from each customer class under proposed alternative rates and existing rates to determine the adequacy of cost recovery. 6.4 Prepare comparisons of typical bills under the existing and proposed rates for each customer class under various meter sizes and levels of usage. 6.5 Provide a comparison of existing and proposed sanitary sewer and water rates to selected neighboring municipalities. Task 7 - Rate Model The objective of this task will be to develop two independent Microsoft Excel spreadsheet analyses rate models that establish financial planning, cost of service, and rate design procedures. These models will enable City staff to periodically revise and update the projections of revenue and revenue requirements, financial plans, cost of service analyses, and design of adequate rates on a routine basis. The City will be able to use the model to calculate annual rate adjustments or to conduct "what-if' analyses reflecting the impact of changes in significant system variables such as customer growth and volume projections, revised budgeted revenues and expenditures, allowances for inflation, capital improvement program schedules, and policy decisions. Provided below are some screenshots of the Black & Veatch model that reflects new trends in modeling and takes advantage of software developments. Some examples of new model enhancements include: Specifically tailored and designed to recognize the systems' unique needs, characteristics and information base, including compatibility with the City's budgetary and accounting systems. , Flexible capital improvement program scheduling allowing for changes in costs, sources of funds, timing, and allowances for inflation. _:3 Ability to develop financial plan cash flow alternatives for changes in customer, volume, and revenue projections; budgetary revisions; variations in timing and amounts of revenue increases; debt service structuring and different capital improvement program scenarios; and changes in other parameters. BLACK & VEATCH I Methodology 25D-20 City of Santa Ana, CA i SANITARY SEWER AND WATER FINANCIAL PLAN [A Ability to assess impact on cost of service allocations to user classes and utility rates of alternative management decisions. _a Capability to independently design and develop rates and charges on an annual basis, thus permitting staff to examine the phase-in needed for rate adjustments over a period of time. The model will test revenue generation by class and in total for proposed rates and indicate impacts on customers served through a typical monthly bill analysis. The following were integrated for simplicity of use. Screen shots are shown below. H "Virtual" Inputs Management - All inputs are managed through the Inputs navigation function 3 Detailed Assumption Development - customized for each client's needs; this allows for detailed development of revenues, expenses, and capital and operating plans Sensitivity Analysis - A dashboard system that allows users to create scenarios for financial planning and rate revenue increases General Navagation - Black & Veatch Model Home Page t. Navigation Features- provides users with the ability to navigate throughout the model from any worksheet. 2. Main- returns users to the Main Menu screen. 3. Inputs-takes users to the Model ranges designated for input variables. 4. Analysis- directs users to either the revenue sufficiency scenario plan or the rate design modules. 5. Revenue Suffleleacy- leads users through the calcuf EDITS of the cash flaw process. 6. Ratas/Cost ofServlce-leads users through the cost of service and rate design process. 7. Reports-directs users to custom reports for use in meetings, documents or other purposes. 8. Help-provides users help in understanding rate study components and navigating the model. f BLACK & VEATCH I Methodology 25D-21 City of Santa Ana, CA SANITARY SEWER AND WATER FINANCIAL PLAN Inputs Management - The Inputs Page L Clicking the "inputs- button on the upper left will direct the user to the Inputs Page. Note the Navigation Features bar is present on every page, to provide easy navigation and access to features. 2. Inputs options are grouped by modufe -revenue sufficiency and cost of service/ rate design. All key inputs are accessible through this page, providing the user one place to find all inputs needed to update the model. 3. Select the Budget button to proceed to the next example. BLACK & VEATCH I Methodology 25D-22 City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN 1. Navigation Features - provides users with the ability to navigate throughout the Model from any worksheet. 2. Summary of significant output (rate revenue increases and debt service coverage) and override functions used in scenario analysis. 3. Summary graph showing annual target balances (bars) and actual annual balances (diamonds) - Fiscal years 2010 through 2012 show actual balances at the target level, indicating a rate revenue adjustment is required to achieve these balances. 4. Summary graph showing annual targetlhorizontal lines) and actual debt service coverage (bars) - Fiscal years 2009 and 2010 show actual coverage at the target level, indicating a rate revenue adjustment is required to achieve these results. 5. Summary graph showing the source of proceeds used to fund the CIP. These results are based on user designated funding selected on the CIP worksheet. 6. Summary graph showing annual rata revenue adjustments. Task 8 - Meetings, Reports and Presentations The objective of this task is to identify meetings and deliverables for the City. Specific subtasks are: 8.1 Attend at minimum one (1) monthly meeting with City staff. Schedule conference calls as needed to update staff on progress of the R&R Program and rate models. 8.2 Draft Report Document the preliminary findings associated with the R&R Program r. Document preliminary findings of financial plan, cost of service and recommended rate structure M Present draft report to the Water Resources Division, Finance Department and member of City Council, as desired BLACK & VEATCH I Methodology 25D-23 Scenario Planning City of Santa Ana, CA SANITARY SEWER AND WATER FINANCIAL PLAN 8.3 Final Report ==3 Incorporate changes pursuant to comments from City staff, Subcommittee, and City Council Present final report to Subcommittee and City Council prior to initiating Prop 218 requirements TY Submit final reports and rate models in MS Word and Excel 2007, and Adobe Acrobat Portable Document (.pdo format Task 9 - Optional Tasks The objective of this task is to identify optional duties that the City may engage Black & Veatch to perform. The specific methodologies associated with these items will be expanded upon the City's determination to proceed with any specified item. Specific duties are: Project growth and water demands for the sanitary sewer and water systems. 9 Conduct a rate analysis on the basis of available water supply. z-- Build a complete and thorough CIP program for both the sanitary sewer and water systems. 4 Develop a Water Master Plan using existing City GIS data. BLACK & VEATCH i Methodology 25D-24 City of Santa Ana, CA ( SANITARY SEWER AND WATER FINANCIAL PLAN M Collectively the project team has over 100 years of providing consulting services to municipal, special district, and investor owned utilities. U The project team members have deep utility industry knowledge, skill sets and backgrounds that span the necessary technical disciplines to effectively map, assess and make relevant and practical recommendations to improve the sanitary sewer and water systems as well the financial performance of the City's systems. These skills include utility operations, finance, accounting, engineering processes, regulatory and technology. M Senior project team members, including the Project Manager, have engineering backgrounds combined with business acumen that is unmatched by our competitors. The project manager has served as expert rate witnesses and serves on national rates and financing committees. This access to industry-setting trends and approaches can be brought to bear on the City's study. Project Manager The proposed Project Manager, Ms. Ann Bui, has direct experience in assisting water and sewer utilities conduct cost of service and rate design studies. She recently assisted Marin Municipal Water District with its first cost-of-service study. The project evaluated price elasticity impacts, weather normalization techniques for revenue forecasting, and pricing signals for conservation as well as several alternative rate structures. In Orange County, Ms. Bui has provided financial planning and rate study services to the City of San Juan Capistrano since 2009. She worked with BLACK & VEATCH I Qualifications The senior members of the Black & Veatch Team are actively involved with the industry's thought leadership: Ann Bui -AWWA • Finance, Accounting and Management Controls Committee, Vice Chair and Head of Accounting/ Finance Handbook Subcommittee • Strategic Management Practices Committee, Member Keith Barber-National Association of Clean Water Agencies • Finance Committee, Member Ahmad Habblan- Associate Editor -ASCE Journal of Piping Systems • Trustee - AW WA Distribution & Plant Operation Division Past Chair - ASCE Pipeline Division Executive Committee, ASCE's Underground Pipelines Asset Management (UPAM) Committee, & ASCE 's Technical Committee on Trenchless Installation of Pipelines 25D-25 Following are a few highlights and brief synopsis of the project team that demonstrates the capabilities of Black & Veatch. City of Santa Ana, CA I SANITARY SEWER AND WATER FINANCIAL PLAN Schedule The following schedule assumes receipt of Notice to Proceed (NTP) on or before September 20, 2011. The schedule reflects a high-level schedule that provides time blocks and key dates for the activities. The proposed schedule assumes timely receipt of requested data, timely turn-around on materials submitted for review, and access to City staff for meetings. Black & Veatch understands the time-sensitive nature of both the developments of an R&R Program and the execution of the Rate Study and as such we have the availability and resources to start this project immediately upon receipt of City's NTP. Notice to Proceed on ME EN EN on Task 1. Project Management Task 2. Asset Inventory GAP Analysis Task 3. Capital Asset R&R Needs Eval Task 4. Financial Plan " M MR ? ? 6 a T ask 5. Cost of Service Analyses M = Task 6. Rate Design Task 7. Rate Model Task 8. Meetings & Reports Notice to Proceed G Draft Report ti+ City Presentation (Feb 2012) • Regular Meeting X Final Report (Feb 2012) Public Hearing Presentation (TOD) BLACK & VEATCH ) Schedule 25D-26 Exhibit B 25D-27 hlaC1 & I I J' h i f F :_on,081, 1011. "9 naht,, e- ed A Gity of Santa Ana, CA Budget Black & Veatch proposes to perform the scope of work presented in the proposal on a time and materials basis for a not to exceed amount of $191,340 inclusive of direct expenses incurred at actual cost. Direct expenses include airfare, car rental, mileage, parking, hotels and outside reproduction costs. The matrix below provides a detailed breakdown of the estimated hours and cost by task. SENIOR PROJECT VISORS ANALYST OTSTL T QA/QC AD Task 1. Project Management Task 2. Asset Inventory GAP Analysis Task 3. Capital Asset R&R Needs Evaluation Task 4. Financial Plan Task S. Cost of Service Analyses Task 6. Rate Design Task 7. Rate Model Task 8. Meetings & Reports Total Hours Direct Expenses 8 4 8 $4,280 10 64 140 $35,990 16 144 112 $50,400 40 194 $38,890 12 4 48 $11,140 12 60 $11,800 8 4 32 $8,000 32 4 40 72 $27,840 178 20 154 614 $188,340 $3,000 HOURLY RATES Services provided within the scope of services and additional services authorized by the City are proposed to be billed according to the schedule below. All invoices are billed monthly based on time and materials. These rates apply to all members of the project team. Direct expenses such as airfare, car rental, hotels, etc. are charged at direct, out-of-pocket cost. Senior Analyst $145 Consultant $175 Senior Advisors $210 Project Manager $245 Project Director / VP / Partner $270 Plus Direct Expenses 25D-28